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RepublicofthePhilippines
SUPREMECOURT
Manila

ENBANC

G.R.No.L15862July31,1961

PAULOANGandSALLYC.ANG,plaintiffsappellees,
vs.
FULTONFIREINSURANCECO.,ETAL.,defendants.
FULTONFIREINSURANCECO.,defendantappellant.

SantiagoRanadaforplaintiffsappellees.
BenjaminS.Valtefordefendantappellant.

LABRADOR,J.:

The present action was instituted by the spouses Paulo Ang and Sally C. Ang against the Fulton Fire Insurance
Company and the Paramount Surety and Insurance Company, Inc. to recover from them the face value of a fire
insurance policy issued in plaintiffs' favor covering a store owned and operated by them in Laoag, Ilocos Norte.
From a judgment of the court ordering the defendant Fulton Fire Insurance Co. to pay the plaintiffs the sum of
P10,000.00,withinterest,andanadditionalsumofP2,000.00asattorney'sfees,andcosts,thedefendantshave
appealeddirectlytothisCourt.

OnSeptember9,1953,defendantFultonFireInsuranceCompanyissuedapolicyNo.F4730340,infavorofP.&S
DepartmentStore(SallyC.Ang)overstocksofgeneralmerchandise,consistingprincipallyofdrygoods,contained
inabuildingoccupiedbytheplaintiffsatLaoag,IlocosNorte.ThepremiumisP500.00annually.Theinsurancewas
issuedforoneyear,butthesamewasrenewedforanotheryearonSeptember31,1954.OnDecember17,1954,
thestorecontainingthegoodsinsuredwasdestroyedbyfire.OnDecember30,following,plaintiffsexecutedthefirst
claim form. The claim together with all the necessary papers relating thereto, were forwarded to he Manila
AdjustmentCompany,thedefendants'adjustersandreceivedbythelatteronJane8,1955.OnJanuary12,1955,
the Manila Adjustment Company accepted receipt of the claim and requested the submission of the books of
accountsoftheinsuredfortheyear19531954andaclearancefromthePhilippineConstabularyandthepolice.On
April6,1956,theFultonFireInsuranceCompanywrotetheplaintiffsthattheirclaimwasdenied.Thisdenialofthe
claimwasreceivedbytheplaintiffsonApril19,1956.OnJanuary13,1955,plaintiffPauloAngandtenotherswere
chargedforarsoninCriminalCaseNo.1429intheJusticeofthePeaceCourtofLaoag,IlocosNorte.Thecasewas
remandedfortrialtotheCourtofFirstInstanceofIlocosNorteandtheredocketedasCriminalCaseNo.2017.The
saidcourtinadecisiondatedDecember9,1957,acquittedplaintiffPauloAngofthecrimeofarson.

ThepresentactionwasinstitutedonMay5,1958.TheactionwasoriginallyinstitutedagainstboththeFultonFire
InsuranceCompanyandtheParamountSuretyandInsuranceCompany,Inc.,butonJune16,1958,uponmotionof
theParamountSurety,thelatterwasdroppedfromthecomplaint.

On May 26, 1958, the defendant Fulton Fire Insurance Company filed an answer to the complaint, admitting the
existenceofthecontractofinsurance,itsrenewalandthelossbyfireofthedepartmentstoreandthemerchandise
containedtherein,butdenyingthatthelossbythefirewasaccidental,allegingthatitwasoccasionedbythewillful
act of the plaintiff Paulo Ang himself. It claims that under paragraph 13 of the policy, if the loss or damage is
occasionedbythewillfulactoftheinsured,oriftheclaimismadeandrejectedbutnoactioniscommencedwithin
12 months after such rejection, all benefits under the policy would be forfeited, and that since the claim of the
plaintiffswasdeniedandplaintiffsreceivednoticeofdenialonApril18,1956,andtheybroughttheactiononlyon
May5,1958,allthebenefitsunderthepolicyhavebeenforfeited.

OnFebruary12,1959,plaintiffsfiledareplytotheaboveansweroftheFultonFireInsurance,allegingthatonMay
11,1956,plaintiffshadinstitutedCivilCaseNo.2949intheCourtofFirstInstanceofManila,toasserttheclaim
that this case was dismissed without prejudice on September 3, 1957 and that deducting the period within which
saidactionwaspending,thepresentactionwasstillwithinthe12monthperiodfromApril12,1956.Thecourtbelow
heldthatthebringingoftheactionintheCourtofFirstInstanceofManilaonMay11,1956,tolledtherunningofthe
12monthperiodwithinwhichtheactionmustbefiled.Saidthecourtonthispoint:
 True, indeed, plaintiffs committed a procedural mistake in first suing the agent instead of its principal, the
herein defendant, as correctly pointed out by counsel for the defendant, for 'Un agente residente de una
compania de seguros extranjera que comercia en las Islas Filipinos no es responsable como mandante ni
comomandatario,envirtuddecontratasdeseguroexpendidosanombredelacompania',(Macias&Co.vs.
Warner,Barnes&Co.,43Phil.161).Butthemistakebeingmerelyprocedural,andthedefendantnothaving
beenmisledbytheerror,'Thereisnothingsacredaboutprocessorpleadings,theirformsorcontents.Their
sole purpose is to facilitate the application of justice to the rival claims of contending parties. They were
creatednottohinderanddelay,buttofacilitateandpromotetheadministrationofjustice(Alonsovs.Villamor,
16Phil578.)

Thecomplaint,Exh.'C',wasdismissedbytheCourtwithoutprejudice(Exh.'H1')onSeptember3,1957,and
motionforreconsiderationdatedSeptember21,1957.TheinstantcomplaintwasfiledonMay8,1958.The
RulesofCourt(See132thereof)isapplicableinthecomputationoftime.Now,ascorrectlypointedoutbythe
plaintiffs'counsel,bysimplemathematicalcomputation,thepresentactionwasfiledleasthinnine(9)months
afterthenoticeofrejectionreceivedbyplaintiffsonApril19,1956,becausethefilingoftheoriginalcomplaint
stoppedtherunningoftheperiod."(Decision,pp.4243,R.O.A.)

Inviewofthereasonsthusabovequoted,thecourtrendereddecisioninfavoroftheplaintiffs.

OntheappealbeforethisCourt,defendantappellantarguesthatthecourtbelowerredinholdingthatthefilingof
theprevioussuittolledorsuspendedtherunningoftheprescriptiveperiod.

Theclausesubjectoftheissueisparagraph13ofthepolicy,whichreadsasfollows:

13.Iftheclaimbeinanyrespectfraudulent,orifanyfalsedeclarationismadeorusedinsupportthereof,orif
anyfraudulentmeansordevicesareusedbytheInsuredoranyoneactingonhisbehalftoobtainanybenefit
underthisPolicy,or,ifthelossordamagebeoccasionedbythewillfulactorwithconnivanceoftheInsured,
or,iftheclaimbemadeandrejectedandanactionorsuitbenotcommencedwithintwelvemonthsaftersuch
rejectionor(incaseofarbitrationplaceinpursuanceofthe18thconditionofthisPolicy)withintwelvemonths
afterthearbitratororarbitratorsorumpireshallhavemadetheiraward,allbenefitsunderthisPolicyshallbe
forfeited.(Emphasissupplied).(Decision.p.10,R.O.A.).

TheappellantcitesinsupportofitscontentionthecasesofE.Macias&Co.vs.Warner,Barnes&Co.,Ltd.,43Phil
155E.Macias&Co.vs.ChinaFireInsuranceCo.,46Phil.345andCastilloetc.vs.MetropolitanInsuranceCo.,47
O.G.(September,1951).

In answer to appellant's contention, counsel for appellees contend that the action of the plaintiffs against the
defendanthadnotyetprescribedatthetimeofthebringingoftheaction,becausetheperiodofprescriptionwas
interruptedbythefilingofthefirstactionagainsttheParamountSurety&InsuranceCo.,inaccordancewithArticle
1155oftheCivilCode.Counselfurtherarguesthatthebasisofprescriptionofanactionistheabandonmentbya
personofhisrightofactionorclaim,sothatanyactofsaidpersontendingtoshowhisintentionnottoabandonhis
rightofactionorclaim,asthefilingofthepreviousactioninthecaseatbar,interruptstheperiodofprescription.
Furthermore,counselargues,thedismissalofthepreviousactioniswithoutprejudice,whichmeansthatplaintiffs
havetherighttofileanothercomplaintagainsttheprincipal.

Thebasicerrorcommittedbythetrialcourtisitsviewthatthefilingoftheactionagainsttheagentofthedefendant
company was "merely a procedural mistake of no significance or consequence, which may be overlooked." The
condition contained in the insurance policy that claims must be presented within one year after rejection is not
merelyaproceduralrequirement.Theconditionisanimportantmatter,essentialtoapromptsettlementofclaims
againstinsurancecompanies,asitdemandsthatinsurancesuitsbebroughtbytheinsuredwhiletheevidenceasto
the origin and cause of destruction have not yet disappeared. It is in the nature of a condition precedent to the
liabilityoftheinsurer,orinotherterms,aresolutorycause,thepurposeofwhichistoterminateallliabilitiesincase
theactionisnotfiledbytheinsuredwithintheperiodstipulated.

The bringing of the action against the Paramount Surety & Insurance Company, the agent of the defendant
Companycannothaveanylegaleffectexceptthatofnotifyingtheagentoftheclaim.Beyondsuchnotification,the
filingoftheactioncanservenootherpurpose.Thereisnolawgivinganyeffecttosuchactionupontheprincipal.
Besides,thereisnoconditioninthepolicythattheactionmustbefiledagainsttheagent,andthisCourtcannotby
interpretation,extendtheclearscopeoftheagreementbeyondwhatisagreeduponbytheparties.

ThecaseofE.Macias&Co.vs.ChinaFireInsuranceCo.hassettledtheissuepresentedbytheappelleesinthe
caseatbardefinitelyagainsttheirclaim.Inthatcase,Wedeclaredthatthecontractualstationinaninsurancepolicy
prevails over the statutory limitation, as well as over the exceptions to the statutory limitations that the contract
necessarily supersedes the statute (of limitations) and the limitation is in all phases governed by the former. (E.
Macias&Co.vs.ChinaFireInsurance&Co.,46Phil.pp.345353).Asstatedinsaidcaseandinaccordancewith
thedecisionoftheSupremeCourtoftheUnitedStatesinRiddlesbargervs.HartfordFireInsuranceCo.(7Wall.,
386), the rights of the parties flow from the contract of insurance, hence they are not bound by the statute of
limitationsnorbyexemptionsthereto.Inthewordsofourownlaw,theircontractisthelawbetweentheparties,and
theiragreementthat anactiononaclaimdeniedbythe insurermustbebroughtwithinoneyearfromthe denial,
governs,nottherulesontheprescriptionofactions.

Thejudgmentappealedfromisherebysetasideandthecasedismissed,withcostsagainsttheplaintiffsappellees.

Bengzon,C.J.,Padilla,Concepcion,Reyes,J.B.L.,Barrera,Paredes,Dizon,DeLeonandNatividad,JJ.,concur.

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